Saturday, August 9, 2014

Window on Eurasia: Putin’s Economic Confrontation with West Will Destroy His Regime, Mitrokhin Says

Paul
Goble

Staunton, August 9 – Russia’s
economy was already in trouble before the West imposed sanctions, and those
sanctions could lead to the collapse of the Putin regime in time. But the
Russian president’s decision to respond to these sanctions with a total economic
confrontation with the West” will significantly “speed up” this scenario,
Vladimir Mitrokhin says.

In a commentary on Grani.ru
yesterday, Mitrokhin focuses on what he says is the most interesting aspect of
the deteriorating situation of Russian forces in Ukraine: “what influence will
the military defeat of the terrorists have on the internal politics of Russia.”
Neither of the two possible outcomes works to his benefit (grani.ru/opinion/mitrokhin/m.231891.html).

In the first, the defeated forces
would make their way to Russia and at a minimum cost Putin the support of those
who wanted him to act more boldly in support of his Ukrainian adventure.
Mitrokhin says he doubts this would lead to a coup given the tight control
Putin’s security agencies maintain over the military.

And in the second, Putin introduces
Russian forces into Ukraine to “save” the situation, “first in the framework of
a ‘humanitarian’ operation and then for holding the territories of the
separatist republics according to the Transdniestria variant.” But that appears
improbable because “it would mean an open war of Russia with Ukraine, the EU
and North America.”

At a minimum, Mitrokhin says, this
would entail full-scale sanctions by the West against Russia, including a
complete ban on the export of oil and gas to the EU and “the freezing of
offshore accounts in European and American banks.”That “would mean the rapid and inevitable end
of the regime.”

If Putin chose the first variant, he
could have played for time because “political problems with the extreme right
and military are on the whole something curable especially under conditions of
nationalist hysteria which could be easily shifted toward a new object of
hatred” by the regime.

“But the events of the last week
have shown that Putin has entered a state of war with the West in which major
mistakes are inevitably made.” One of those was his prohibition on the
importation of European and American products and his closure of the skies over
Russia to Western air carriers.

Such actions, Mitrokhin says,
represent “serious steps along the path which Russia passed exactly a century ago.”Indeed, he argues, “the path to the Russian
revolution of February 1917 began in August 1914 not only in connection with the
beginning of the war of Russia with its main European partner, Germany,” but
also with the response of the tsarist regime economically.

Drawing on the research of American
historian Eric Lohr, Mitrokhin argues that “the beginning of the war marked a
radical revision by the Russian government of its former economic and ethnic
policy” in the direction of expelling foreigners from positions of strength in the
economy and pushing for import substitution.

That shift led to capital flight, a
decline in trade, and a decline in industrial production. Those trends in turn
had a negative impact on the military. And when the harvest failed in 1916, the
result of bread riots in the cities and revolution.

Russia today is even more integrated
into the world economy than it was and consequently more dependent, Mitrokhin
says. Consequently, pursuing an autarchic policy will have negative
consequences economically and then politically, consequences that may be beyond
the capacity of the Putin regime to cope.

Had Putin allowed Western sanctions
to be imposed without his own response, the impact of the sanctions would have
been serious but relatively slow, and the Kremlin leader would have had time to
deal with most of them, Mitrokhin says. But having declared a “total” economic
confrontation with the West by his own actions, Putin has compounded his
problems.

The Russian economy will decline
more quickly and precipitously and massive popular demonstrations against the
regime will become more likely, especially if Putin’s response economically or
in Ukraine leads to a new round of sanctions by the West.In some key sectors, Moscow has no good
option to prevent disaster.

What will happen as a result?
Mitrokhin asks. “The Europeanized citizens living in Moscow and other major
cities who are dissatisfied with the Putin regime” have put up with it as part
of a bargain in which the Kremlin has become “a political dictatorship” but
they are allowed to work in or for foreign firms, to trade with the West, and
to get higher salaries.

There are “hundreds of thousands” of
such people, he says. Moreover, “there are tens of thousands of students who
have studied economics, international relations, management and public
relations in Moscow and Petersburg [who] dream of finding work” in foreign companies.
What could the Russian government offer them if it cuts them off from foreign
firms?

Moreover, their anger and Western
actions appear likely to undermine the Russian banking system, something that
will create even more havoc in the economy of a kind Putin cannot easily deal
with.How long will such people put up
with this? “When will they go out into the streets? In the fall of 2016? Or in
February 2017?” the Moscow analyst asks.

And he suggests that it will more
likely be in the latter date when people run out of the potatoes they harvested
from these dacha plots during the summer of 2016, yet another echo of the
revolutionary events of a century ago.